April's Auto Sales Weakness: It's the Economy, Stupid

Last week, we looked at the impact of the housing slowdown on various economic sectors. When we mentioned automobiles, one of the common responses was that it's GM (GM)/Ford (FORD) specific, and Toyota (TM) was doing just fine in the U.S. The blame was that GM made lousy cars.

It turns out that glib answer was totally wrong. As the chart below shows, total car and light-truck sales fell 7.6%. This is an issue that is impacting just about ALL makes and manufacturers, not just GM. Even mighty Toyota sales dropped 4.3% in the U.S.

Against the overall trend? Bentley and Ferrari are sold out for the year, but they are a hand-crafted, small volume, luxury exception.

Here's a WSJ excerpt:

The results also demonstrate the challenge the U.S. economy poses to more-successful Asia-based competitors like Toyota Motor Corp., which posted its first monthly U.S. sales decline in nearly two years. Toyota, which recently surpassed General Motors Corp. in global vehicle sales to become the world's No. 1 auto maker, had been increasing sales earlier this year even as Detroit struggled and has continued to invest in auto-making capacity in North America, the world's largest car market.

Toyota's sales in April fell 4.3% from April 2006, according to Autodata Corp. Ernest Bastien, a U.S. Toyota executive, said consumers appear "tentative" and are exhibiting a "wait-and-see" attitude.

The housing slump and rising energy prices could threaten industry sales the rest of the year. Stagnant or falling home values could undermine consumer confidence and put a financial squeeze on consumers who have used home equity to finance big-ticket purchases. Higher gasoline prices and a drop in building activity hurts demand for the industry's biggest, most profitable vehicles. And some in the industry are concerned that the bite gasoline takes out of consumers' pockets is beginning to affect the sales of all cars, not just gas-guzzlers.

How did other automakers fare? Ford reported an April U.S. sales decline of 13% y/y. Ford car sales declined 23.6%: Truck sales declined nearly 6%. GM fared marginally better -- sales declined only 9.5%. Daimler Chrysler (DCX) sales actually increased 1.2% -- and you can be sure the growth was MB, not Chrysler. The vaunted Japanese automakers did not do much better: Toyota down -4.3% -- their first monthly decline in 2 years; Honda (HMC) slipped -9.1%; Nissan (NSANY) dropped a whopping -18%.

The intellectually dishonest can blame this on GM's "lousy cars" but the facts utterly belie that nonsense. Growth continues to decelerate, and with the housing ATM ebbing, car sales are being impacted.

Source:
Economy Trips Up Auto Makers' Sales
MIKE SPECTOR and JOHN D. STOLL
WSJ, May 2, 2007; Page A3
http://online.wsj.com/article/SB117769686725985057.html

Comments

[Winston Kotzan:]

True that its a lousy economy right now, but you gotta give GM credit for making some bad products and marketing campaigns. Why else would TM be able to gain so much territory on F and GM? Besides, when was the last time you saw a GM car featured in a GM advertisement? I think their own marketing department is too embarrassed to show their cars for more than a few frames!

2007 May 02 06:21 PM

[Johnny Bitc...:]

What confused minds suggested the declines were due to GM product issues ?

It's hard to imagine that people should be surprised by this string of events:

1. Housing Bubble springs leak

2. Lack of diligence in lending standards exposed

3. Appraisal fraud exposed

4. Lending standards tighten

5. Housing leak gets larger as people realize how important the loose lending was in funding speculators, fools, and ne'er do wells......

Anyway, to close the loop, should it be any surprise that auto sales are plummeting ?

No. In fact, it's double trouble for autos:

1. probably a similar lack of lending diligence which will tighten

2. alot of autos financed by real or perceived housing wealth which has since faded, if not evaporated completely......

Bottom line: things are not looking good.

John.

2007 May 03 01:21 AM

[cynic69:]

Barry - Youve got to be kidding. While Toyota was spending a fortune on R & D so that they could build and sell hybrids the idiots at GM, F and DM were whining about MPG standards and retooling so that they could build ever bigger SUVS (the most dangerous car in the world). They (the idiots) have no social concience regarding global warming, peak oil or energy independence for the US. Even though the most beutiful cars in the world are designed in Newport Beach Ca. the idiots tend to design cars that are the ugliest monstrosities on the road. When the scarcity of drives the price of gas to $6/ga. the Detroit guys are going to go bellie up. When that happens we can break out the champagne.
Gale

2007 May 03 01:58 PM

[Johnny Bitc...:]

Gale -

Pipe down you phony global warming believing fool.

This guy said nothing about US automakers putting out well designed or appropriately targeted vehicles.

What he said is that the sales picture across the entire industry is deteriorating due to general economic weaknesss.

Some confused economic forecasters are unable to discern between GM's loss in market share to Toyota and losses due to a cyclically shrinking overall market for automobiles at this point (late) in the economic cycle.

2007 May 03 04:42 PM